Writing your own Will is dangerous

This article is republished courtesy of the original author, Brett Davies Lawyers. Please contact them directly for any questions and advice you may need on this topic.

Question:

My New Year Resolution was to write my own Will.

I thought it would be easy. However, I have come to realise that Will writing is far more complicated than I first thought. I asked my financial adviser for some help. She almost spat her extra-skinny, organic, soy, decaf-latte (obviously her New Year resolution was to be more health conscious) at me in shock. Apparently, my idea was ‘ridiculous’.

I am not perturbed. I’d like some hints. What are some of the essentials of a good Will?

Answer:

Congratulations on making a Will a priority in 2011. However, your suggestion to write your own Will is giving me heart palpitations. If I had an extra-skinny, organic, soy, decaf-latte, I would be doing the same thing as your adviser.
Many people underestimate the complexity of their affairs. Even if you just have your family home and a car, you still need a Will that is drafted clearly and correctly. Add in complexities such as superannuation, investment properties, blended families, ex-spouses – and the importance of a good Will increases exponentially. Otherwise, you may as well name the tax-man and your ex-husband’s new mistress as your main beneficiaries.

Wills are complicated legal documents which require a high level of precision and thought. Only instruct a specialist lawyer to prepare your Will for you. Please do not attempt to write it yourself. Although it may appear simple and clear to you, I guarantee your beneficiaries and the Probate Court will see it differently. Using your “simple self-drafted” Will, your beneficiaries may be tied up for years and spend all of their inheritance on legal fees to figure out who gets your assets. Unfortunately, I have seen this happen.

At Civic Legal, we have solicitors that only practice in tax, superannuation and estate planning. Our Wills are 3 Generation Testamentary Trust Wills – these protect your assets from vultures, protect your beneficiaries from squandering their inheritance and they also save tax.

Here is a short list of questions to ask yourself before meeting with your lawyer to prepare your Will:

  1. Who should be the Executor?
    The best Executors are those people getting the proceeds of the Estate. This usually means the spouse in the first instance and then all the children once Mum and Dad both die.What if the children don’t get along? We hold firm our view that even where this is the case, the best Executors are still all the children. This is because the Executors hold a subservient position. Their prime duty is to pamper and obey the whims of the beneficiaries.It is often forgotten that the naming of a person as an Executor is simply an invitation. It is not a mandatory appointment. If a person who is named as an Executor is unable or unwilling to act they can renounce (give up) the position.The Executor clause in your Will could be improved:

    i.          if it does not appoint the surviving spouse at first instance

    ii.          it only appoints one child as Executor once Mum and Dad die – it is appropriate to appoint all of the children as Executors

  2. What should be done with the home?
    There are two ways of allowing someone to live in your home at death without giving them ownership of the property: Life Estates and Rights to Reside.Life Estates and Rights to Reside have adverse tax consequences – potentially triggering Capital Gains Tax. They generally lose the principal place of residence CGT exemption.
  3. Superannuation as an ‘Estate Asset’ Superannuation does not automatically form part of the estate. It often does not go into the Will.Want to know how to deal with Superannuation and get it to non-dependants tax-free?
  4. Why is tax planning essential at death?
    Capital Gains Tax, Income tax and transfer duty are the silent insipid de-facto death duties.Your Will can benefit from a Three Generation Testamentary Trust:

    • A Testamentary Trust is designed to minimize tax. That is, it is designed to allow the beneficiaries to wash out the de facto death duties
    • One of the advantages of a Testamentary Trust is that the tax payable on the income earned on the estate or Capital Gains Tax payable is paid to family members on low tax rates.
    • Each Primary Beneficiary controls their own Trust by becoming the “trustee” of their own Trust. For tax purposes, they control the assets. They do not own the assets.
    • The Primary Beneficiary is often the person in complete control of the Estate assets in their own Testamentary Trust.
  5. Protecting beneficiaries?
    Simple Wills do not protect any beneficiaries who are bankrupt. This results in the beneficiary’s inheritance passing straight out of their hands to the Trustee in Bankruptcy. Effectively the beneficiary’s inheritance is lost.A 3 Generation Testamentary Trust Will from Civic Legal gets around this unfair situation by including Protective Trusts.A Protective Trust keeps the wealth in the family. A Protective Trust is an instruction to the Executor to not make a gift to a beneficiary if certain criteria are true for that beneficiary – for example the beneficiary is bankrupt, lacks mental capacity or is under age.

    The Protective Trust is there to protect the beneficiary and not deny them of their inheritance. Once the beneficiary is out of bankruptcy, mentally sound and has attained the age of majority they are entitled to their inheritance.

  6. Who might challenge my Will?
    Where there’s a Will – there’s someone who can challenge it. There is a strong blood line relationship which defines who can make an application to the Supreme Court to challenge a Will. The class of people who can challenge your Will include, your:

    • parents
    • spouses – including de factos, mistresses and gay partners
    • biological and adopted children (but not step-children)
    • biological and adopted grandchildren
    • anyone that you financially maintain (but not in all States).

    To reduce the chance of anyone challenging the Will, we always recommend a Considered Person clause. A Considered Person clause names those people who you don’t wish to make provision beyond what is stated in the Will. There’s no need to air out your dirty laundry. When you die, your Will becomes a public document. Best not to give Ms Busybody next door any ammunition. A Considered Person clause does not prohibit a person challenging the Will, however it makes it harder for them to be successful.

    Read a previous article on who can challenge a Will.

Ready to instruct a lawyer to prepare your Will?

I am happy to discuss your Estate Planning with you. Contact me at (08) 9325 7999

Who can challenge a Will?

This article is republished courtesy of the original author, Brett Davies Lawyers. Please contact them directly for any questions and advice you may need on this topic.

Who can challenge a Will?

It doesn’t matter who you are – all Wills can be challenged by certain people. Potential challengers can only come from 5 types of relationships:

  1. Your parents
  2. Your spouse (including de-facto partners)
  3. Your children (adopted children but not children born from sperm or egg donation)
  4. Your grandchildren
  5. Anyone that you are ‘maintaining’ (but not in all States).

At Brett Davies Lawyers, we encourage you to expressly name any unintended beneficiaries (for example, a de-facto girlfriend) in your Will. This shows the Court that you have not merely ‘forgotten’ that person. This is a ‘considered person clause’. This does not stop them from challenging, but makes it harder for them to be successful.

I’ve heard stories where sneaky people stop challengers by giving them $1 dollar in the Will. Can I do this too?

Sadly, you can’t stop anyone from challenging your Will. I’ve heard these stories too – but they are only successful in overseas jurisdictions (such as the USA). In Australia, if the challenger falls within any of the five categories above, then they have a right to challenge.

Nothing you can do can take away this right. For example, you can’t say:

  • “I give my de-facto $1 and she cannot challenge my Will”.
  • “I give $20,000 to my partner, but if she challenges my Will then the gift is void.” (known as the Lang Hancock clause because he tried to use this in his Will – obviously without success).
  • “I give the whole of my estate to my partner, but if she remarries then this gift is void”
  • “I give the whole of my estate to my partner on the basis that she remains Anglican and attends church every Sunday”.

All of these are void for public policy reasons. You can’t use your Will to force someone to do or not do something. This is called ‘ruling from the grave’. The Supreme Court doesn’t like you trying to oust their jurisdiction like that.

What is the silver lining? Just because someone can challenge your Will, doesn’t mean that they are successful.

Matt’s Tip:

If you are concerned about people who may challenge your Will then ensure you speak with a specialist estate planning lawyer about drafting a Will for you.

Update your Will when your cheating husband is given marching orders

Question: My client is distraught. After finding out that her husband’s personal assistant was taking the ‘personal’ part of the job literally, they are now divorced. I am a Western Australian accountant that wants to protect my already fragile client. I hear that divorce invalidates a Will. Should she make a new Will? What happens if she fails to make a new Will? Read the article for the answer…

This article is reproduced courtesy of the author LawCentral. Many of their articles are direct answers of a reader’s question – as below.

Question: My client is distraught. After finding out that her husband’s personal assistant was taking the ‘personal’ part of the job literally, they are now divorced. I am a Western Australian accountant that wants to protect my already fragile client. I hear that divorce invalidates a Will. Should she make a new Will? What happens if she fails to make a new Will?

Answer: Your client should make a Will as soon as possible.

The laws are different in Western Australia compared to the rest of Australia. In the bad old days, only marriage revoked a Will – divorce didn’t. This meant that there were unfair situations where a divorced spouse benefited from their ex-partner’s Will. All States deal with this. However, Western Australia does it differently. Under the Wills Amendment Act 2008 (WA), divorces, like marriages revoke a Will. Revocation means that the Will is now totally void. I suppose this is good because ex-spouses no longer benefit from their separated spouses – but other States do it better (see below).

What happens if your client doesn’t make a new Will?

If your client doesn’t make a new Will, then she dies without a Will – intestate. Trust me when I say that you don’t want to die intestate. It means that your estate is then administered according to the relevant state’s Administration Act. Relatives are beneficiaries in the proportions as set out by the act. This happens even if it is not what you wanted.

Worse, the evil Public Trustee is the default administrator. The Public Trustee automatically takes a percentage of your assets on your death. The greater your assets, the more you pay – even if there is no additional work. It is expensive and usually a waste of time. If you trust the government more than your family, then sure, let the Public Trustee take over. Otherwise, just appoint the beneficiaries as the executors.

What happens outside of WA?

In all other States and Territories, the Will remains valid after divorce. The only change is that the ugly spouse is removed. If your ex was an executor then they lose that job. If they were a beneficiary, the gift fails. Everything else in your Will remains the same. The integrity of the rest of the Will is intact and the document still stands. This means that the estate is distributed according to your wishes (but excluding your ex-spouse).

What is wrong with dying intestate?

You ask what is wrong with dying without a Will. Dying intestate has tax problems. You are taxed long after you die. Although death taxes were abolished by 1981, your estate is reduced by the three defacto death taxes – Income Tax, Capital Gains Tax and Stamp Duty. Failure to plan allows these hungry taxes to eat away at your estate’s value. LawCentral Platinum members can safeguard themselves by learning about:

  • Three Generation Testamentary Trusts;
  • Post Testamentary Trusts (Poor Man Trusts); and
  • Superannuation Testamentary Trust

You can sign up for Platinum membership of LawCentral from the link below:

LawCentral Online Australian Legal Doc Shop

Store your Will safely in the Will Bank

When a lawyer drafts your Will for you it is common that they will store the original and you receive a copy.  One downside of that is keeping track of the lawyer’s current contact details. (I haven’t heard from the lawyer who drafted our Wills 5 years ago.)

The Public Trustee in Western Australia provide a fantastic free serice called the WA Will Bank. They store your Will in a “purpose-built, fire-proof vault, keeping it safe from loss, theft or damage”.

This is a brilliant community service and I recommend it highly. When you store your copy of your Will at home just write on it that the original can be found at the WA Will Bank with the Public Trustee. Your family/friends with then easily be able to find it.

For interstate readers – I’ve browsed the websites of other state trustees but they don’t appear to offer a similar Will Bank service. If however you know of such a service please let me and other readers know in the comment section below.

Peter Brock’s FORMER partner WINS estate battle

“The former partner of the late motor racing legend Peter Brock has won a legal battle over his estate”, reports the ABC News.

Brock apparently left three Wills – the latter one changed a major beneficiary from his former partner (Bev Brock) to his partner at the time of his death (Julie Bamford). But the latter Will was unsigned.

Unfortunately it is too late for Brock to advise us of his true intentions, leaving his estate wide open to a challenge based on many people second guessing his intentions.

Have you made your intentions clear with regard to the distribution of your assets?

Are there possible beneficiaries who may be unhappy and seek to challenge your estate, irrespective of the presence of a valid Will?

For example:

  • Do you have a former partner(s), or children from other relationships?
  • Does your current partner have children from other relationships and with whom you have a relationship?
  • Do your children have a close relationship with each other and their surviving parent, or are they likely to bicker after you are gone?

Examples like that of Peter Brock remind us to get our affairs in order and to make our intentions clear. Not just to others, but also in a legal sense.

If you do not have a valid Will that is up to date then it is time to sort it out.

LawCentral provide a wonderful online resource to guide you in the creation of a legal Will, and it is very cost effective. Visit LawCentral now.